In the face of economic pressure, North Carolina lawmakers voted March 30 to repeal and replace the state's controversial bathroom law. Here's what you need to know. (Monica Akhtar/The Washington Post)

The Justice Department on Friday said it was dropping a federal lawsuit filed last year against North Carolina over the state’s “bathroom bill,” which restricted the public bathrooms transgender people were allowed to use.

The Trump administration announced the decision in a filing Friday in the U.S. District Court for the Middle District of North Carolina. This two-sentence filing, a joint notice of dismissal, was submitted by federal officials with the Justice Department as well as attorneys for North Carolina’s Democratic governor, its Republican legislative leaders and the University of North Carolina.

Spokesmen for Gov. Roy Cooper (D), who signed the new bill, and State Senate Leader Phil Berger (R) and House Speaker Tim Moore (R), who backed it, did not immediately respond to requests for comment Friday. (The North Carolina state government is closed because of the Good Friday holiday.)

Attorney General Jeff Sessions. (Yuri Gripas/Reuters)

North Carolina’s bathroom bill, also known as House Bill 2 or HB 2, was signed last year and immediately set off a firestorm because of its transgender bathroom provisions and language reversing local ordinances expanding protections for LGBT people.

The law led to economic boycotts, with companies including Deutsche Bank and PayPal halting planned expansions in the state and sports behemoths like the National Collegiate Athletic Association and National Basketball Association relocating games to move them out of the state. According to one recent estimate, the bill could cost North Carolina at least $3.7 billion over a 12-year period.

In May 2016, the federal government stepped in, filing a lawsuit that said the bill discriminated against transgender people and violated the federal civil rights statutes. North Carolina filed its own lawsuit against the federal government that same day, though attorneys for the state later dismissed their complaint, saying that they could pursue their claims in the federal case.

When then-Attorney General Loretta E. Lynch announced the lawsuit against North Carolina, she said it was “about a great deal more than just bathrooms.” Under the Obama administration, officials pushed directives they described as meant to protect transgender students nationwide.

President Trump had criticized Barack Obama’s directives during the campaign, and earlier this year, the Trump administration revoked federal guidelines specifying that transgender students had a right to use the public school bathrooms matching their gender identity. Attorney General Jeff Session was also critical of the Obama administration’s guidance and said authorities should defer to local lawmakers, and he has long been an opponent of expanding LGBT rights.

In North Carolina, after repeated attempts at negotiating a repeal of HB 2 fell through, lawmakers passed a new law in March as they scrambled to beat a deadline dictated by the NCAA. The college sports giant had already moved some games due to HB 2 and was threatening to move more if the law was not changed. The new law, signed on March 30, was enough for the NCAA as well as the NBA, which both said they would consider North Carolina for future events due to the new measure.

But supporters and opponents of HB 2 have found unlikely common ground in the new measure, which they agree was not a full repeal of the controversial original legislation. Former North Carolina governor Pat McCrory (R), who signed HB 2 and was ousted from office last year after a campaign in which it played a major role, said just as much after the new law passed.

Civil rights advocates who had pilloried McCrory and the original bill said they opposed the new law because it bans local governments from passing measures aimed at protecting LGBT people until 2020. The Human Rights Campaign said the new measure “institutes a statewide prohibition on equality” and called it a betrayal of the LGBT community.

On Friday, the American Civil Liberties Union and Lambda Legal, which are representing people in a lawsuit challenging HB 2, rebuked the Justice Department for abandoning its challenge because of the new bill.

“Here is yet another instance of the Trump administration and Attorney General Jeff Sessions withdrawing the federal government’s support from transgender individuals, and they are using the fake repeal of HB 2 as cover,” Jon W. Davidson, legal director of the group Lambda Legal, said in a statement. “Sadly, this was not unexpected, now that anti-transgender forces are in charge of the Departments of Justice and Education. Once again, the Trump administration continues to abandon transgender Americans.”

The ACLU and Lambda Legal said they would amend their lawsuit challenging the first bill to include the new measure as well.

“The Trump Administration may want to use the fake repeal of HB 2 as an excuse to further turn their backs on the transgender community, but the rest of us aren’t going to give up that easily,” James Esseks, director of the ACLU’s LGBT Project, said in a statement. “We’ll continue this fight as long as it takes to truly strike down this disastrous law for good.”